Pirate Ltd employs 5 staff. Each staff member is entitled to 20 days annual leave per annum. Leave loading of 17.5% is paid when the leave is taken. At 1 July 2013 the balance in the provision for annual leave account was $20 303.
Details of each employees leave entitlement at 30 June 2014 are as follows:

There are 260 work days in a year. On 1 July each year all employees receive a 5% wage rise. There are no other wage rises given during the year.
The closing balance in the provision for annual leave account at 30 June 2014 is:

Question

Pirate Ltd employs 5 staff. Each staff member is entitled to 20 days annual leave per annum. Leave loading of 17.5% is paid when the leave is taken. At 1 July 2013 the balance in the provision for annual leave account was $20 303.
Details of each employees leave entitlement at 30 June 2014 are as follows:

There are 260 work days in a year. On 1 July each year all employees receive a 5% wage rise. There are no other wage rises given during the year.
The closing balance in the provision for annual leave account at 30 June 2014 is:

Quizplus · Accepted Answer

To calculate the closing balance in the provision for annual leave account, we need to follow these steps:

1. Calculate the total annual leave entitlement for all 5 staff members:

20 days x 5 staff members = 100 days

2. Calculate the total annual leave loading for all 5 staff members:

100 days x 17.5% = 17.5 days

3. Calculate the total cost of annual leave for all 5 staff members:

(100 days + 17.5 days) x (1 + 5%) x (total staff wages / 260) = $23,086

4. Subtract the previous year's balance from the total cost of annual leave to get the closing balance:

$23,086 - $20,303 = $2,783

Therefore, the closing balance in the provision for annual leave account at 30 June 2014 is $23,086. So, the answer is C.

Pirate Ltd Employs 5 Staff